Ailing economy due another body blow The week ahead

October 08, 1990|By Chicago Tribune

With the economic picture blurred by concerns over the federal budget deficit and the Persian Gulf crisis, it's hardly an auspicious moment for another inflation scare. But it's nearly time for another scrutiny of where prices are headed. Wholesale prices for September will be reported Friday, and the verdict isn't likely to be favorable. A month ago, wholesale prices for August leaped 1.3 percent, with most of the blame heaped on higher oil prices. That unhappy report helped trigger steep slides in already battered stock and bond prices.

Watch for: Another body blow for the economy, with prices up 0.7 percent or more in September. Anything less than that will temper inflation paranoia, but a higher number will stir more turmoil on Wall Street.

CREDIT CONCERNS: As recently as last week, predictions were rife that the Federal Reserve would nudge interest rates lower. However, the time frame keeps being pushed back. Most analysts believe Fed Chairman Alan Greenspan won't act quickly unless there are clear signs that Congress and the White House are acting in concert on the deficit.

The "R" word: Talk of recession refuses to die, in part because of weakness in manufacturing. The sector has lost 520,000 jobs since its peak in January 1989, with a 115,000 decline in the last two months. "These are recession-type numbers. The Fed should ease," says Alan Lerner, economist at Bankers Trust Co. in New York. He believes Greenspan will feel compelled to inch interest rates lower as soon as this week.

NEXT UP: The nation's major department store chains on Thursday report September sales, a closely watched indicator of the direction of consumer spending, which accounts for two-thirds of the nation's economic activity. The Commerce Department follows Friday with its report on retail sales, which includes the key category of auto sales. Commerce also provides on Friday the numbers on housing completions for August.